Review&Forecast—January 2010 Issue

Signs of a slowly rebounding economy are fueling hope among commercial fishermen and fish farmers that better times lie ahead for harvesters and producers of U.S. fish and seafood products, which would be a welcome development for an industry hit hard by the current economic downturn and its resulting effect on seafood demand.

As the economy worsened, per capita consumption of seafood in the U.S. initially flatlined, then fell, as consumers scaled back purchases to cope with the recession.

As demand dropped, prices quickly followed suit, and net returns to producers dipped to levels not seen in more than a decade.

Americans, as a rule, do not prepare much seafood at home: More than 70 percent of the seafood sold in the U.S. is consumed in restaurants, according to the National Marine Fisheries Service (NMFS). Therefore, any decline in restaurant spending—as has been occurring for the past 18 months—quickly trickles down to fish and seafood producers.

Aggressive seafood promotions touting low, low prices by major restaurant chains in recent months have, in fact, spurred consumer interest, but prices paid to producers for most popular species remain low.

If restaurant spending stabilizes or begins to grow in the coming months, most seafood experts anticipate a gradual improvement in producer prices, moving back toward at least marginally profitable levels.

Yet Another Challenge
But as the domestic commercial fishing and fish farming industries began to see signs of a modest rebound, a new 800-pound gorilla entered the room: sustainability.

From Wal-Mart and Safeway grocery stores to the Darden Restaurants group (including chains like Red Lobster and Olive Garden), more and more major U.S. buyers of seafood are now requiring suppliers to prove that their products were farmed or caught in a sustainable manner.

While there is little evidence to show that U.S. consumers are driving the sustainability movement, major buyers are responding nonetheless to intense pressure from the environmental sector to only offer seafood products that carry some sort of 'green' ecolabel.

There are several certification programs available to seafood producers, each providing its own unique ecolabel. But these voluntary third-party audit certification programs are expensive, and, in the minds of many U.S. producers, redundant and unnecessary.

Domestic producers argue that they are already the most intensely regulated and tightly monitored providers of seafood on the planet. Ecolabeling, they point out, only adds cost to their products, making them even less competitive with foreign imports.

However, whatever their concerns, as long as the trend of the major institutional buyers in the U.S. refusing to buy noncertified products continues, domestic seafood suppliers will be forced into participating in these sustainability certification programs.

With domestic seafood consumption stalled and dockside/farmgate prices still trending downward, the additional burden of ecolabeling is another hurdle for an industry that is desperately trying to recover, reinvest and expand production capabilities.

Lingering Uncertainty
A year into the presidency of Barack Obama, there remains uncertainty over the adminstration's approach to fisheries management, open-ocean aquaculture and other areas of major concern to seafood producers.

The appointment of Dr. Jane Lubchenco, a Pew fellow and former Environmental Defense Fund trustee, to head NOAA has been a cause for concern among U.S. commercial fishermen and fish farmers due to her ties to the environmental community.

Lubchenco's announcement shortly after taking the helm that a key priority for NOAA would be transitioning to catch shares—a controversial and not widely understood process—as a primary management tool for fisheries set off an intense and at times angry debate among fishermen.

An added point of tension with the industry has been Lubchenco's failure thus far to fill the top job at NMFS after a nearly yearlong search.

Legislation to advance open-ocean aquaculture development in U.S. waters has, understandably, taken a backseat to other, more pressing priorities for both the Obama adminstration and Congress over the past year.

But within the aquaculture community, there are now growing questions over what level of commitment exists for open-ocean aquaculture at the federal level and what form any policy might take under Lubchenco and the as-yet-unnamed NMFS director.

Still Moving Forward
While the U.S. commercial fishing and fish farming industries would clearly benefit from a more stable economy and more clarity in the regulatory arena, the industries are far from paralyzed.

New commercial fishing vessels are still being built for healthy fisheries, like the New England scallop fleet, and there are pockets of expansion within the U.S. aquaculture community.

Credit is still tight, and that is a lingering concern for both sectors—farming and fishing—but producers are fairly resilient and have learned to adjust in the tight money market.

If the economy holds, most industry insiders are forecasting a better year in 2010.

'I know fishermen made some money this year—the trick now is getting them to spend it,' one industry supplier recently commented. 'Like all of us, they are hanging onto their money longer these days.'

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